Jokowi puts high hope on Tuban refinery revival to cut Indonesia’s petrochemical imports

JAKARTA, Dec 22, 2019, Jakarta Globe. President Joko “Jokowi” Widodo has put high hope on a soon-revived petrochemical refinery in East Java to slash the country’s costly refined petroleum imports by more than a third in three years, Jakarta Globe reported.

The refinery Trans-Pacific Petrochemical Indotama, now a subsidiary of Indonesia’s state-owned energy company Pertamina, will be redeveloped to produce chemicals for making plastic as well as oil fuels following years of inactivity due to financial and legal problems.

And the one who Jokowi tasked to keep a close eye on the refinery development was his old confidant Basuki “Ahok” Tjahaja Purnama, the no-nonsense former Jakarta governor, who is now sitting as the president commissioner at Pertamina.

“I just told the state-owned enterprise minister, Pertamina’s president director, and president commissioner that everything must be completed in no more than three years. They requested four, but no. It must be done in three years,” Jokowi said as quoted by Antara news agency on Saturday.

The strict order came as none of the five refineries Jokowi envisioned in his first term as president get finished. Last week, Jokowi lamented politically-connected importers who worked behind the scene to stall refinery projects to keep the country dependent on imports.

Petrochemical and oil fuel imports cost Indonesia $12.4 billion in the first eleven months this year, accounting for 7.6 percent of the country’s total imports. It was also the main contributor to the country’s persistent current account deficit.

The new refinery would slash more than a third of the imports, Jokowi said.

“The production will save up to $4.9 billion. It’s enormous,” Jokowi said.

“This is a [case for import] substitution. Every year we import, import, and import. Though we can make it ourselves, we don’t do it,” he said.

Jokowi visited Trans-Pacific Petrochemical Indotama in the Tuban district in East Java on Saturday. Ahok, along with Minister of State-Owned Enterprises Erick Thohir and Nicke Widyawati, Pertamina’s president director accompanied the president during the visit.

This occasion also marks Ahok and Jokowi’s first public appearance together after the former was charged and later convicted for blasphemy due to his impromptu comment about certain Moslems lie using Koranic verse for political gain.

Tirtamas Group, which controlled by Defense Minister Prabowo Subianto’s brother Hashim Djojohadikusumo, businessmen Al Njoo and Honggo Wendratno, built Trans-Pacific Petrochemical Indotama in 1995.

The refinery, however, run into financial and legal problems. It had accumulated close to $1 billion in debt to Pertamina and Rp 2.6 trillion ($186 million) to the government by the end of the last year.

Honggo, who owns shares in the refinery through Silakencana Tirtalestari, was under investigation for a corruption charge in 2015. He allegedly involved in a scheme of siphoning off oil condensate, which the refinery was supposed to process into fuel and sell to Pertamina, to other buyers between 2008 and 2010.

The crushing debt and corruption allegation has rendered the refinery inactive in the past three years.

The government step in October, converting the debts into 95.9 percent shares in Tuban Petrochemical Industries, a holding company that wholly controls the refinery.

Tuban Petrochemical then issued new shares in November, which allow for a majority take over by Pertamina for Rp 3.1 trillion.

Pertamina now owns 51 percent in Tuban Petrochemical as the government’s ownership is diluted to 47 percent. Honggo still owns the remainders, through a shell company Silakencana Tirtalestari.